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Lance Ayrault, CEO of Flexcar, gave a great talk at the Northwest Entrepreneur Network (NWEN)Venture Breakfast at the Bellevue Harbor Club yesterday on the topic of social entrepreneurship (a topic near and dear to my heart ... and blog). Flexcar is an interesting exemplar of a non-traditional social venture, in that they are a for-profit company, hence our subtitle, "Doing Well by Doing Right". Because we were running a bit behind in setting up for the talk, I skipped over some of my planned introductory remarks, so I'm going to take this opportunity to expand a bit on those here before sharing some notes on the insights and experiences Lance shared during his presentation.

My very first taste of entrepreneurship came at NWEN's Entrepreneur University in November 2004, and the very first talk I saw at EU 2004 was by Guy Kawasaki, author of The Art of the Start, which I immediately adopted as my bible of entrepreneurship, and not just because he was the first speaker I encountered on the topic of entrepreneurship (i.e., baby duck syndrome), but because he made sense in his prescription to make meaning:

[T]he best reason to start an organization is to make meaning – to create a product or service that makes the world a better place

Increase the quality of life

Right a terrible wrong

Prevent the end of something good

... making meaning is the most powerful motivator there is ... [and] if you fail, at least you failed doing something worthwhile.

Guy made sense with all of his other prescriptions for being a successful entrepreneur, but this idea of making meaning, in particular, really inspired me ... especially as I'd just left a position where I was no longer making meaning, and was exploring the path of entrepreneurship as a way of opening up the blockages I'd experienced, and enable me [once again] to work on something I deeply believed (and still believe) will make the world a better place. Guy, and the other speakers at EU 2004, helped me decide to take the plunge -- or perhaps leap -- into entrepreneuria.

Shortly after deciding to become an entrepreneur, I joined the NWEN Venture Breakfast committee, hoping to contribute some of the lessons I'd learned in organizing academic / research conferences (CSCW 2002 and UbiComp 2003) to these monthly business networking -- and education -- meetings. Speakers at subsequent NWEN events have [also] been inspiring (and educational), but most have focused more on how they have successfully faced the challenges of raising financial capital (making money) and less -- if at all -- on how they have raised social capital (making meaning).

Last summer, I was inspired and humbled in watching the PBS series The New Heroes, a four-hour series hosted by Robert Redford, which tells "twelve dramatic stories of social entrepreneurs who bring innovative, empowering solutions to the most intractable social problems around the world." [The producers also note that "Becoming a social entrepreneur takes both a vision for revolutionary change and the gumption to do something about it" (italics mine).] I wanted to share some of that energy with the other members of NWEN, and thus proposed to organize a breakfast presentation on social entrepreneurship. There was some concern expressed by some members of the committee about whether enough NWEN members would be interested in stories, or lessons learned, by ventures whose sole purpose was to make the world a better place. It's not that NWEN members don't care about efforts to solve large-scale social problems, the question was whether they would be able to apply what they might learn from social ventures in their own entrepreneurial endeavors (and, having been on the entrepreneurial path for over a year now, I recognize -- better than ever before -- the importance of making money, in addition to making meaning). Thus, I was advised to see if I could find a venture -- and a venturer -- who was addressing social problems in a way that might be instructive to as broad a spectrum of NWEN membership as possible ... and so was delighted when Lance Ayrault agreed to come talk about his experiences with Flexcar.

Flexcar is a Seattle-based for-profit company that provides a car-sharing service in several metropolitan areas, offering residents in these communities the opportunity to save money on their transportation costs while simultaneously reducing other transportation costs -- such as air pollution, traffic congestion and parking problems -- in those communities. In my initial conversations with Lance, I was surprised to learn two things: companies that promote social wealth have access to financial and logistical resources not available to other for-profit ventures, and such companies have to find and maintain a delicate balance in marketing its products and services, so that its messages address individual needs and community improvements, while not alienating potential customers who may associate "green" with "expensive" and thus be unwilling to pay the perceived cost of achieving greater social value for the community.

During Lance's presentation, I learned a great deal more, including:

the average cost of car ownership is $760/month (18% of an average household's expenses)

the average car is used less than one hour per day

the average speed on Los Angeles freeways on workdays is 17 miles per hour (and expected to decrease to 14 mph)

Flexcar charges an annual membership fee of $25, and then $10/hour to "borrow" a car. Thus, the average cost of car sharing is approximately $300/month, less than half the average cost of car ownership. One might expect that these economic savings would be very appealing to individuals as well as organizations that maintain a fleet of [owned] cars, but Lance said that his biggest challenge is an educational one -- most people have no idea how much their transportation costs are ... and car ownership is a deeply ingrained tradition in the American psyche.

However, there are significant social costs to the individual use and ownership of transportation vehicles that rely upon fossil fuels, including

traffic congestion (roadways)

land congestion (parking places)

air congestion (CO2 and other air pollutants)

other pollutants (just thinking about gas and oil leaks from old and/or poorly maintained vehicles)

Among the societal benefits that may accrue from a shift from car ownership to car sharing (in addition to reducing some of the dimensions of congestion and pollution listed above) are

Improved public transportation (car sharing fills a gap in the overall "mass transit lifestyle" among other options such as walking, biking, busing or taxiing)

Expanded mobility options for more people (e.g., low-income and elderly)

Support for local merchants (because Flexcar charges by the hour, people tend to run errands in the local neighborhood rather than travel further for products and services)

Lance shared a number of other lessons he has learned through the Flexcar experience, that apply more broadly to entrepeneurship in general:

Government grants can be a blessing and/or a curse, so it's important to know what strings are attached and be willing to say "no" (similar to what I've heard about working with angel investors)

One of the advantages a startup has over a government agency is that it can move more quickly (advantages that startups often enjoy over large companies: passion, endurance and speed)

One of the biggest challenges Flexcar faces is redefining the value proposition (similar to what Vern Raburn said about Eclipse Aviation ... which might be seen as a "jet sharing" venture)

"Believe in what you are doing or go home" (coming full circle back to Guy Kawasaki's exhortations to make meaning)

Earlier this week, a friend told me that Lance is also speaking at the Eastside Executive Forum meeting next Tuesday in Bellevue. So anyone [local] who wants to hear more about Lance's insights and experiences can see him there ... or get copies of his slides and an MP3 audio recording of his talk from the NWEN "breakfast notes" site when we post them (probably sometime next week).

Peter van Stolk, founder, president and CEO of Jones Soda, gave an energetic, inspiring and irreverent presentation at this month's NWEN Venture Breakfast on being relevant and real to, for and with your customers. The official title was "Creating Meaningful Relationships with Customers", but the unofficial title might be better expressed as "Marketing in a time when no one cares". [Note: The MP3 and slides from Peter's NWEN talk are not yet available, but much of the content -- and spirit -- of his talk can be found in the Fast Company article Jonesing for Soda.]

Jones Soda doesn't play by the usual rules of market competition: instead of choosing battlefields where their competitors might be defeated, they look for where their competitors ain't, and channel their energies into those fields of play ... an interesting variation of guerilla marketing, but more aligned with the art of play than the art of war. They particularly seek out people who are passionate about what they do -- musicians, extreme sports athletes, spelling bee competitors -- and sponsor their events and/or set up Jones Soda display cases in businesses that support those kinds of people (e.g., surf shops).

Peter shared a number of ways that Jones Soda creates and maintains emotional connections with its customers. The one that I found most innovative and relevant was the Jones Soda Photo Gallery, which contains 786,000 of the over 4.5 million photos that Jones Soda customers have submitted as candidates for inclusion on a future Jones Soda bottle label (see an example above, from the January 2006 run). As Peter said, "you don't tell people you're cool, you let others tell people you're cool" ... and what better way to motivate customers to tell people how cool Jones Soda is than to put their photos on the labels?

I don't drink soda, and so while Jones Soda has been customerizing its labels since 2001, this was news to me. I also don't eat snack bars, so when I got home from the breakfast, and told my wife about how cool Jones Soda was, I was surprised when she showed me a Luna Bar that offered a slightly different variation of customerization -- using words instead of photos -- to enable customers to share "a dedication to a special woman in your life".

Yana Kushner, director of Luna equity and advanced product development at Clif Bar (who makes Luna Bars), also invoked the concepts of passion, excitement and connection in a Fast Company article about Brands We Love [note to self: subscribe to Fast Company again]:

A couple of years ago, we started something on the back of the bar called "Luna Dedication," where the women of Luna wrote personal dedications to women who have touched their lives in some way. By giving them a piece of ourselves, they feel part of the Luna family. It's a two-way street. It keeps them excited and passionate, and it also keeps us internally passionate.

I had earlier speculated on the evolving nature of promotional considerations as new social marketing channels arise, noting possible conflicts of interest that may diminish the potential impact of some of these channels (e.g., how much can we trust reviews by people who may derive direct financial benefit from the products or services they are reviewing). What I particularly like about the Jones and Luna customerization techniques is that they are really co-promotional: customers whose visual or verbal content is co-opted for use on labels can promote themselves (and/or their loved ones) along with the product(s) they are telling people about. Neither Jones nor Luna offers any financial incentive to people whose content is chosen for co-promotion on their labels; the wealth they are sharing is attentional rather than financial.

A few days after the NWEN breakfast, Biznik co-founder Dan McComb implemented a new feature on the Biznik web site that might be viewed as offering attention in return for attendance: showing photos of bizniks who were at an event (e.g., the Biznik Happy Hour). Although he could have simply listed the names of people who were there, showing the photos adds an extra dimension of recognition and acknowledgment, and I suspect this will provide more incentive for bizniks to both attend an event and to go back and review the events. It would be interesting to study the motivational differences between listing people's names and listing their names + photos in different contexts.

And, speaking of promotion, motivation and photos, I would be remiss not to comment on how Interrelativity offers a mechanism for co-promotion through our proactive display application -- most recently deployed at the Biznik Happy Hour -- which provides new opportunities for people to connect with one another by showing content from people's profiles on a large computer display when they are detected nearby. We interleave the display of sponsor profiles with attendee profiles -- providing each sponsor and attendee 10 seconds of fame in a revolving window of attention -- so that people can learn more about sponsors while they are learning about each other (examples of sponsor profiles for the BalMar and Biznik, with an attendee profile for me in between, are shown below).

Each time we have deployed our system, surveys have shown that people have learned new things about both people they hadn't met as well as people they already know. And, although we haven't explicitly asked this question, observations and informal interviews suggest that people enjoy seeing their own profiles shown on the big plasma display as much as they enjoy seeing other profiles. Our latest surveys have also been investigating whether people are also learning things about the sponsors ... who, at least in the current business model, are the ones who will be paying for the co-promotional considerations.

Sue started out by presenting a number of statistics on angel and venture capital investments over the past few years. In 2004, venture capital groups made 2,800 investments totalling approximately $21B; the trend for VC investments appears to be fewer, larger, later (= safer?). In contrast, there were a total of 48,000 angel deals for a total of $22.5B in 2004. She estimates that there are 225,000 active angel investors right now, which represents a tiny fraction (perhaps 1 / 7) of the total number of accredited individuals (with financial means and sophistication as well as risk tolerance) who are potential angel investors. Angels tend to invest between $25K - 500K, with an expectation of return on investment on the order of 5 - 7 years. A typical angel investment round for a company may bring in somewhere on the average of $1M - 3M ... although angel investment is not typical -- only 1% of companies obtain angel investment (compared with 0.1% of companies that receive venture capital investment, and 0.01% that go public -- Sue led us in an exercise "Altogether now, nod your head: IPO is not an exit strategy").

Sue provided a list of criteria that most angel investors [should] apply when considering investment opportunities, which might be summarized as "keep it simple, be open, and be real". Specific factors include the business (scalability, novelty or disruptiveness of the concept and/or technology), the people (passion, skills and experience of the core team and their advisors), the plan and the opportunity for financial return.

The statistics were fascinating, and the criteria are very helpful, but I was most inspired by the similarities between entrepreneur / investor relationships and [other kinds of] personal relationships, e.g., between spouses, parents and children, and teachers and students. While Sue emphasized that an angel investment is a business relationship, with an expectation of financial reward, it involves a number of other factors that transcend business (although I increasingly see fewer distinctions between business and other aspects of life), such as social responsibility and a number of factors that I would characterize as karma: a desire to give back to the community and pass on what they have learned to the next generation of entrepreneurs (Sue characterized many angel investors as "recovering entrepreneurs" ... and I would not be surprised if she counted herself in that category).

Sue spoke of the courtship process (3-6 months) between an entrepreneur and prospective angel investor, where open, honest and relatively frequent communication is critical (as in dating, or a marriage). Her emphasis on the mentoring and advising, and even nurturing (which was not a term she used, or perhaps even intended, but it seems very apt to me) role that angel investors often want to play in a company, parallels my conception of what an ideal parent/child or teacher/student relationship should be. She also noted that the "coachability" of an entrepreneur -- his or her willingness to ask for and receive advice ... and act on it -- is a key factor in her assessment of an investment opportunity ("when the entrepreneur is ready, the investor appears"). I see this as yet another manifestation of one's willingness to open up to the abundance of the universe, and see even more clearly why these types of investors are called "angels".

One final note: the subtitle for this post, "It's the Relationship, Stupid!", was chosen specifically to channel the wisdom of Kathy Sierra's recent post on "It's the [?], Stupid!", where she emphasizes the importance of focusing on the meaningful benefits that a product or service really offers, which are often overlooked by those who are providing them -- shining a laser beam on what really matters to one's customers (or voters) ... or, in Kathy's rather irreverent and pithy way of expressing this, how to help your users kick *ss! My intention in invoking this terminology is to reflect the idea that many aspects of the relationships between angel investors and entrepreneurs -- above and beyond the financial aspects that often constitute the primary (or sole) focus, at least on the part of some entrepreurs -- are often overlooked, but these less tangible dimensions of angel investments may, in fact, be the most valuable to the ultimate success of a venture.

I always go to the Northwest Entrepreneur Network (NWEN)Venture Breakfast Meetings; even when the topic doesn't really excite me, I never fail to make or renew valuable connections with wonderful people during the earlybird networking. And, I am sometimes pleasantly surprised by a topic and/or speaker(s) being far more interesting than I expected, as was the case yesterday. [Disclosure: I am a member of the all-volunteer Venture Breakfast Committee for the not-for-profit organization.]

My only experience with eBay was in bidding on a handbag that my daughter really wanted for her birthday last fall. I was far too laid back on the first one, and failed to win the item; I paid a little more attention the next time, but still lost on that item, too. The third time, I was ready to pounce; I monitored the auction carefully, and placed my final bid -- $2 higher than the previous bid, when there were 2 seconds left -- and won the item. It was exciting, and I could see how people could become addicted to this kind of activity, but the effort exceeded my cost/benefit threshold, and I have not returned to the site ... and so, frankly, I wasn't all that interested in learning about how much money people are earning, or saving, by using eBay.

After starting off with a prominent and ominous (prominous?) slide warning about copyright restrictions on her presentation material, the moderator, Janelle Elms, an eBay Universty Instructor, polled the early morning audience on our experiences and intentions with respect to eBay. About 5% of those present had sold something on eBay, a little less than half had bought something on eBay, and perhaps 2% were interested in making a living by selling on eBay (I imagine that all of these percentages were significantly lower than her usual audience at an eBay University session, especially that last number).

The moderator and the two panelists, Greg Harrison, co-founder and CTO of mpire (which provides "personal ERP software for online sellers"), and Howard Hawk, co-founder and President of Bidadoo ("the easy way to eBay" for individuals, businesses and non-profits), helped open my eyes to the much larger potential of eBay. A number of statistics were shown about the amount of items bought and sold on eBay, but it was the types of items, buyers and sellers that I found really interesting, as well as some of the second-order effects.

I thought eBay was primarily used for selling used goods (an online garage sale), but new goods are increasingly part of the mix. I also thought that most transactions were between individual consumers (C2C), but businesses -- large and small -- are increasingly buying and selling through eBay (though I didn't think to ask, then, what the proportion was between B2C and B2B transactions).

And, it's not just products being bought and sold on eBay -- services can be bought and sold as well! Janelle used the example of an insurance agent who was holding a seminar about some "boring" product he was offering; the man sold tickets to the event via eBay (for some token amount), which created a significant buzz around the event, and helped fill the seminar. Gaylé Morrison (one of my favorite NWEN members) later suggested that this kind of thing could be extended more generally for speakers, creating a new kind of speakers' bureau within eBay; as a former conference chair, I think this would be really cool, since the reputation system could be used to help event planners select speakers who are knowledgeable, articulate and passionate (the latter two are not always easy to determine from speaker bios).

Extending this idea a bit further, given the rise of free agency, I wonder if eBay could become a marketplace for assembling teams, in which people can more effectively and dynamically form partnerships and other business relationships for new ventures. And, could eBay create its own currency to provide a barter capability among different people and organizations? Perhaps eBay could provide the means to "enabling a community-driven marketplace for civic good" envisioned by the Interra Project, which I blogged about a while back.

Another interesting aspect to the growth of eBay is the crossovers between the online marketplace and the offline marketplace (another example of what Alex Pang refers to as the impending end of cyberspace, where the distinctions between the so-called online and offline worlds will fade away). Janelle reported that eBay sellers who have "bricks and mortar" stores see a 25% increase in foot traffic in their stores, so setting up an eBay storefront can be an effective new marketing channel for such businesses. Other interesting tidbits include Janelle's observations about passion and self-fulfilling prophecies: "eBay sellers are the most excited group of entrepreneurs I've ever seen" and "If you treat eBay like a garage sale, you will get garage sale prices".

Apparently, more and more people (and businesses) are treating eBay not like a garage sale, but a full-featured marketplace. I started wondering what implications this has for Amazon. I noted earlier that I personally find bidding rather tiresome, and prefer to simply buy things outright ... I'm reminded of different preferences in buying automobiles (more and more of which, of course, are being bought and sold on eBay): perhaps eBay will be the marketplace of choice for those who like to haggle over prices, and Amazon will be the marketplace of choice for those who prefer a fixed price. If eBay offers non-bid purchasing options, then I suspect Amazon may be in real trouble.

Primed by my recently increased appreciation of the potential power of podcasting, I now see that eBay -- and companies like mpire, Bidadoo and iSoldIt -- are [also] reducing barriers to entry and enhancing the long tail in the marketplace. I also see that biztrust, an essential element of bizlove, will be increasingly important in driving these trends (eBay users' increasing trust is one of the significant factors in the increasing average transaction price on eBay). And, based on some of the statistics and examples mentioned throughout the talk, it appears that eBay is enabling tens of thousands of people to realize the promise of "do sell what you love, the money will follow".

Vern Raburn, President and CEO of Eclipse Aviation (mantra: "fly in the face of convention"), gave a rousing presentation at Friday's NWEN Breakfast, describing how his company is redefining the value proposition for jet travel by making private jet travel -- via a new generation of very light jets (VLJs) employed as air taxis -- as affordable as full-fare coach travel on large commercial air passenger carriers. I learned a lot about aviation, and, as at all NWEN events, a lot about entrepreneurship.

These elements combine to result in an efficient, low-maintenance aircraft that can be assembled within 10 days from the time an order is placed ... and 20 days before the payments are due for the components.

Vern relayed a number of differences between the aviation and high tech industries. One aviation veteran, upon learning of Eclipse's plan, revealed the immense difference in scale between the two industries, remarking "you're only going to be a $5B company ... how are you going to survive?" In technology, the non-existence of a product or service is seen as an opportunity; in aviation, the presumption is "it can't be done." Up until a year ago, most in the aviation industry believed the market for VLJs would never exist; now it is widely seen to be the hottest market segment.

Eclipse has attracted the world's largest amount of angel investment -- $475M, with no institutional investors

Everyone wants to combine their occupation with their avocation ... if you don't have passion for what you're doing, it's just a job. Vern is clearly someone who has successfully merged his occupation and avocation, and his passion was contagious and inspiring.

Speaking of occupation, avocation and jobs, after Vern's presentation, Connie Bourassa-Shaw, the Executive DIrector of NWEN, announced that she would be resigning her position at the end of the year, and taking over as director for the Center for Innovation and Entrepreneurship at the University of Washington Business School. We will miss her at the helm of NWEN, but wish her all the best in her new position!

Parker LePla offered insights and experiences on The Essentials of PR and Brand Management at an Northwest Enterpreneur Network workshop this morning. They characterized a brand as a "sustainable differentiator" that represents the intersection of what you do well, what your customers value and what is sustainable over time, embodying the vision, mission and core values of an organization. I was particularly drawn to their description of an integrated brand as the promise you keep as an organization ... bringing to mind the image -- and mantra -- of Horton the Elephant ("I meant what said, and I said what I meant; an elephant is faithful one hundred percent").

I went into the seminar with a moderate to high level of skepticism -- and even cynicism -- about branding, stemming in part to some earlier chafing I felt during the rather stringent brand guidelines introduced by the firm formerly-known-as Andersen Consulting during its renaming (and rebranding) to Accenture during my time there, and in part from an association I've constructed between branding and pretentiousness. However, rather than pretentiousness, the idea of integrity kept surfacing throughout the presentation. In fact, many of the exercises designed to excavate the nature of our respective ventures' brands could equally well be applied to discovering one's true self.

Another idea that kept surfacing was passion. It was noted that people don't typically make rational decisions, they make emotional decisions and then rationalize them afterward. One advantage to a company that can inspire passion and loyalty on the part of customers is that such passion may support 5% to 25% higher prices. As so often happens, I was reminded of a blog post by Kathy Sierra, on "Passion is Blind", in which she offers the observation that "Having passionate users is almost like a get-out-of-jail-free card ... They'll forgive you when you screw up."

There were a number of other useful suggestions for how to manage a brand, "live" a brand, and develop and deliver an effective public relations campaign. Rather than detail them all here, I'll post a link to the sldes, if/when they become available,[Update: the slides can be found here; I've included two exellent diagrams that helped me better understand branding below.]

Levels of Brand Relationship (from p. 8 of the Parker LePla slides):

Discovering Your Brand (from p. 13 of the slides):

and leave off noting I'll note two additional themes that are important for all branding and public relations activities: emotional intelligence and "simplify, simplify, simplify".

[Update: a friend asked about PR stuff, so I'll add a few more notes .]

Public relations was defined as enlisting a third party to assist in your marketing. We were encouraged to give up the notion of "free PR", which does not exist, and instead focus on the notion of "earned media", i.e., if you want media attention, you have to earn it, by adopting the perspective of editors, publishers, and [other] journalists in creating content that they can use, and offering it when they can best use it: in short, how can you make their lives, and those of their customers, better? [Yet another instance of a maxim that Dan Fine shared at EU 2005: everyone you interact with in a business context can be thought of as a customer or potential customer, whether it is vendors, employees, partners, media, investors or people who want to buy your product or service (the "traditional" notion of a "customer") ... in effect, you need to sell them all on some kind of value proposition.]

The key to a successful public relations strategy is message development (and, as always, keeping things as simple as possible):

determining your company's strategic role in your customers' lives,

distilling this down to a short (ideally, one-sentence) positioning statement,

creating a message platform focusing on the three most important messages

identifying three talking points that you want people to remember

A PR campaign is always focused on a specific audience (e.g., no "one size fits all" campaigns), and a company will benefit from having different campaigns for different key audiences (e.g., customers vs. investors). Of course, within the larger context of an integrated brand, I imagine there will likely be significant similarities among diferent campaigns. [Oh, this reminds me: there may also be different branding, and PR campaigns, for your company's brand and the brand of your company's products or services ... though, again, there will ideally be some linkages.]

The basic elements of a PR campaign are one or more of the following

press releases

contributed articles

press events

media kits and contents (electronic and/or print)

stories

There is often a snowball effect in the media: once one media outlet picks up your story, others are more likely to follow suit, so securing that first story is the most challenging task (similar to the domino effect for angel investors that Lon McGowan and Henry Lin talked about last Thursday ... and I suppose an editor or journalist might be viewed as "investing" in your story).

Moonjar, a local company "committed to creating products that encourage communication and that empower children with basic life skills", was mentioned as a company that is modeling the integrated branding and successful public relations campaign management that was discussed througout the workshop. In looking around their web site, I have to agree that they are exemplary, and it is no small surprise that they are one of Parker LePla's clients.

Finally (no, really, I mean it this time), the Parker LePla team stressed the importance of leveraging a public relations campaign by creating a "press room" section of your company web site, reproducing (with permission, of course) articles, and creating a blog for disseminating news about your company.

This last one is rather interesting ... I've started posting a few entries in this blog about some significant milestones I've achieved in my own venture, Interrelativity, but also been rather open about challenges I am facing (or have faced). I keep hearing and reading -- and blogging -- about the importance of openness, vulnerability, integrity and honesty, and want to maintain my commitment to this approach to life and work through this blog. However, I also recognize that some of the PR and branding principles of simplicity and focus may not well represented here. I'll have to give this some more thought...

The Business Plan Writing workshop pn Thursday afternoon was led by Bill Keough, Director of Business Development for Hubspan, Inc., and Bryan Brewer, Founder & CEO of Business Plans Northwest. They posited the goal of a business plan as "a tool to convince someone else that your venture is worth pursuing"; I like that, as it is broad enough to encompass all [prospective] stakeholders. They also emphasized the value of empathy: being able to adopt the perspective of convincees (my term for potential investors and employees ... and existing spouses). Throughout the workshop (and the MITEF seminar), empathy and other traits associated with emotional intelligence (e.g., self-awareness and optimism) were either implicitly or explicitly referenced repeatedly.

The slides from Bill & Bryan's presentation will behave been posted on the NWEN web sitesoon. Among the pearls of wisdom I gleaned from the workshop:

The idea behind a venture is not nearly as important as the management team and their ability to execute (my notes read "99% execution").

The first paragraph of the business plan should include some financial projection that provides quantifiable evidence that you are aiming high.

Your board of advisors can help create an unfair advantage, by giving you access to some world-class expertise that your competition does not have access to.

Wherever there is a business opportunity, there will be competition ... and if it is an [as yet] largely undiscovered opportunity, there is always the competition from inertia.

It's not enough to simply identify the pain that your product or service will help overcome, you have to assemble evidence that enough people will be willing to pay enough money to use your product or service [aye, and there's the current rub for me].

The evening MITEF seminar on angel investing was presented by two entrepreneurs who have recently succeeded in securing angel investment for their companies: Lon McGowan, CEO of iClick, and Henry Lin, Co-Founder of Chelsey-Henry (MITEF does not post slides to their web site; so I posted a copy hereif you are interested in a copy, contact them here). Lon and Henry echoed several of the themes presented at the business plan workshop, with some interesting augmentations and variations.

Among my gleanings from this seminar:

"Investors invest in you, your team and your products or services, in that order"; it is important to clearly convey your passion and knowledge.

Use graphics rather than text in your presentation wherever possible; analogies are very powerful (e.g., describing Chelsey-Henry as "Tumi for women").

Angels typically like to invest in companies with a market opportunity of approximately $2-3M; individual angel investors typically invest between $25-100K in a venture.

Venture capital groups often advertise; angels often prefer to maintain a low profile.

Seeking investment can be viewed simply as a variation on the traditional sales cycle: you are selling equity (many of the excellent suggestions for effect selling I heard at a recent sales seminar presented by John Browne of Workpump and Lori Richardson of Score More Sales, are clearly applicable in this context, e.g., identifying ideal customers, qualifying prospects, and following through).

There were lots of specifics about the legal aspects that I was unaware of, e.g., Preferred Placement Memoranda (PPMs), "blue sky" filings, and various rights. preferences and clauses that have to be worked out ... with legal fees in the range of $15-20K (!); Lon and Henry both emphasized the importance of having a good lawyer (I'm glad I'm all set on at least that count).

I am reminded of the Zen proverb, "When the student is ready, the teacher appears". This student is as ready as he'll ever be, and is very grateful for all the insights and experiences shared by these generous teachers. Time to do my homework!

The company's vending machines sell or rent DVDs or CDs, and their vending machine designs are pretty cool (the CinePod 4, which they brought to the breakfast, is shown below).

What I find most compelling about their business model, though, is that they are situating these machines in places where they can maximize impulse buying opportunities, e.g., offering movie soundtrack CDs at a movie theater, offering exiting theatergoers the opportunity to take the soundtrack home with them.

The presentation was made all the more impressive by what I learned during a discussion with Greg, and his business partner, Phil, after the meeting. Greg said he had never given a presentation before (correction: he had never given a presentation to an audience that large before [see Greg's comment]); I believe this was one of the best presentations -- if not the best -- I've seen in the 5-Minute Forum (which routinely has great speakers). Even more impressive is their gumption: they are young (20s), relatively inexperienced, but full of passion and the drive to make things happen. Greg was clear about what CineVend needs: find hosts and partners, and develop a management team. I think they are on to something big here, and I suspect they will have no trouble in attracting all of the above.

Keith Smith, one of the co-founders of 180solutions, presented a picture that differed significantly from some of the negative press accounts, focusing on five aspects of the company. He started off with the history of the company, a real rollercoaster of highs and lows (including two complete layoffs and one nearly complete layoff), noting that they succeeded in raising $40M soon after achieving profitability ... when they least needed the money (which he said, in hindsight, was exactly the right time to seek funding).

Keith said the goal of 180solutions was to create a new content economy, becoming the "NBC of the Internet", by offering free content in return for users agreeing to view occasional advertisements served up by a client-side application, Zango, that must be downloaded and installed on the user's computer. He contrasted this with Google AdSense, which serves up advertisements in a browser, but claimed that this only supports commercially-relevant content. 180solutions wanted to create a new model for sponsoring non-commercially relevant content (e.g., interactive games) ... without interrupting the consumption of that content. So they came up with what he described as a time-shifting model, wherein content creators (e.g., game developers) make their content available through a publisher who contracts with advertisers to show their promotional content to consumers while they are engaged in commercially relevant activities, e.g., using Internet search sites to find travel information.

Interestingly, Keith said that their average consumer is served up at most one advertisement per day, and even heavy users typically see no more than two or three advertisements per day. Furthermore, in the Q&A session, Dan Todd, 180solutions' other co-founder, claimed that their software does not maintain profiles of their consumers (email addresses, IP addresses or URLs visited), but simply looks for individual URLs containing search queries, and serves up an advertisement based solely on that individual query (advertisers buy keywords, just as in AdSense).

Problems arose (or worsened -- contextual advertising has always had its opponents) when botnets and worms started installing Zango on computers without proper (or any) notice and consent. Unsuspecting users would be searching on the web and be unpleasantly surprised when Zango would pop-up an advertisement, or their spyware removal tools would discover the 180solutions application and delete it ... only to have it mysteriously re-installed again. One aspect of the controversy surrounding 180solutions is whether it was complicit in this use of its software. Some have claimed they turned a blind eye to this type of activity.

Keith made some compelling arguments for how and why this abuse was harmful to 180solutions. Given that their software is now labeled spyware by many spyware removal tools, they estimate that approximately 65M of their legitimate users have unintentionally uninstalled their software (the irony of which was not lost on me), resulting in a loss of $7.5M in customer [re]acquisition costs, and an additional $40M in estimated lost revenue so far this year. Keith also said that the company was slow to recognize and react to these problems ... and it's not clear whether their perspective changed.

He outlined a 5-prong approach they have taken to address the problems created by what he referred to as "inappropriate installs" of their software, focusing on technology, enforcement, education, standards and public relations. One of the most ambitious undertakings was to completely dismantle their distribution network, cutting out the aggregator intermediaries, and rebuilding an entirely new network in which they created direct relationships with the content publishers ... enabling them to impose sanctions for any future abuses.

Toward the end, Keith shared some key factors in the success of 180solutions: their corporate "culture of metrics on a foundation of ethics", emphasizing innovation, a focus on the consumer and empowering employees, reflecting some of the wisdom that others (such as Scott Svenson, Glenn Kelman and Sunny Kobe Cook) shared at NWEN's Entrepreneur University last week.

During the Q&A period, it was clear that some members of the audience were still suspicious of 180solutions actions (and motives). I admit that I found Keith's arguments compelling: it's hard to imagine that many victims of "inappropriate installs" would respond to unwanted advertisements by actually clicking through and making purchases -- especially in sufficient numbers to compensate for the costs Keith enumerated. However, there are other controversies swirling around 180solutions (e.g., stealware), that were not addressed at today's meeting, and so I, too, have lingering doubts about some of their reported practices (I wish I'd done more research ahead of time). I welcome further enlightenment from anyone willing to share their insights and understanding about the controversies.

[Aside: I want to thank Gayle' Morrison for the rather clever phrasing she offered about 180solutions navigating a 180 degree turn. Also, the 5-Minute Forum presentation by CineVend was so fabulous -- and this post has gotten so long -- that I'm going to post a separate entry on that.]

Last year, Entrepreneur University 2004 provided my first glimpse into the world of entrepreneuria. I wasn't sure I was going to attend again this year, since I know so much more about that world now [I note, somewhat sarcastically]. But I'm glad I went to EU 2005, as I learned many new things, relearned some old things (from my new, slightly more experienced perspective), and, as at every NWEN event, connected with some wonderful, interesting and helpful people. The recurring themes that I noticed most often throughout the presentations and discussions was passion, endurance and speed.

Dan Brettler, founder and CEO of Car Toys (and, I discovered in Googling around, Chairman of the United Way "Out of the Rain" initiative to end homelessness), gave an opening keynote presentation on "As the Customer Turns", emphasizing the importance of being able to adapt to changes along four dimensions (which he called "the four C's"): climate, customer, competition and company, and highlighted the endurance of Car Toys as it adapted to each of these factors throughout its various stages of growth since 1987. Dan also talked about Car Toys' aggressive marketing ("advertising by torture") and their success in ensuring that members of their target demographic group (young to middle-aged males) hear /see one of their commercials 4 times per week. [I suspect I may have been one of the only members of the audience to not have ever heard the Car Toys jingle ... in fact, I didnt even know they had one.]

Scott Svenson, Managing Partner of The Sienna Group, gave what I found to be the most personally inspiring presentation. Scott talked about the passion he and his wife had for good coffee and the cafe experience in Seattle, and how much they missed that when they moved to UK. Despite having no experience in retail or the coffee trade, they decided to form Seattle Coffee Company and open up a cafe in London. Everyone told them it would never work, and yet they grew from 1 to 65 stores in three years, and eventually sold the business to Starbucks. Scott offered 5 recommendations for building a successful company:

Build a business like you never plan to sell it. This is in stark contrast to the focus on "exit strategies" I often hear and read about so often from most other businessfolk (e.g., The New Road to Riches), and much more congruent with my own view of entrepreneurship as akin to parenthood (it's our baby). Interestingly, Scott's curent passion is helping build and grow emerging companies, and when The Sienna Group considers buying emerging companies, he is not interested in any companies that are looking for buyers, only those that the owners don't want to sell ... reminding me of the notion (myth?) that married people are more attractive to people seeking new relationships.

Bring as much passion and commitment as you can. Scott and Ally didn't start Seattle Coffee Company to make money, they started it to pursue their passion, and from the outset, they determined that failure is not an option. He noted that passion and commitment is contagious and aligning for the team.

Define a clear and inspiring purpose. It's important for the whole team to feel they are part of something special, something bigger than themselves, that transcends any economic considerations. For Seattle Coffee Company, their goal was to change the way people socialized (offering new places, cafe's) and to help people enjoy life's journey.

It's all about the people. Scott referred to Jim Collins, and his book "Good to Great", emphasizing that it is important to get the right people on the bus -- and get the wrong people off the bus -- early on, and highlighted Jack Welsh's claim that his biggest mistakes were all people mistakes, and usually having to do with a lack of speed (in promoting or firing employees).

Cash is king. [So, I guess it's not all about the people.] Because Scott looks at companies as long term investments, he doesn't calculate valuations based on how much he thinks he can sell a company for (and when); he looks at the company's cash flow, for valuation and, ultimately, decisions on whether to buy.

In the Q&A period after his presentation, Scott talked about how he and his wife brought complementary skills and perspectives to the business (reminding me of Tom Eckmann's observation at an earlier NWEN event that "the biggest challenge faced by an entrepreneur is convincing your spouse that it's a good idea"). He also noted that one of their greatest strengths was what they didn't know (e.g., they didn't realize that opening 8 stores in 12 days was something that not even Starbucks would have attempted) ... and I found myself wondering whether NWEN and other organizations are [therefore] helping or hindering aspiring entrepreneurs ...

Glenn Kelman, Co-founder of Plumtree Software and currently leading operations at Redfin, presented a primer on "Building a Company in Ten Easy Steps" -- he had the best slides, and most [contagiously] enthusiastic delivery, of all the presentations I saw at EU (if I can get a copy, and his permission, I'll post the slides online [Update: I've received Glenn's permission to post the slides here]). There were many gems in what Glenn shared; I'll just summarize a few of the highlights:

aim high (it's easier to recruit others with a big vision),

start early (there will always be more things to figure out)

recruit smart and passionate people (passion being more important than brains)

work hard and fast ("speed kills")

keep it simple

focus on the customer (don't worry about the competition)

be open and honest and respectful (shoot straight down the middle)

share the wealth (more satisfying than hording it)

get plenty of sleep

Mike O'Donnell, President of StartUpBiz.com, presented some of the most controversial and perhaps contrarian views of the day on "building an external team". While nearly everyone else I heard was emphasizing the strategic value of recruiting passionate and committed employees, Mike emphasized the risks of what he calls a "W2 culture" (echoing some issues I've heard discussed regarding an "entitlement society") and made a case for using contractors wherever possible: "don't hire people, hire solutions." Mike argued that contractors can be just as passionate and committed as W2 employees ... and if/when that passion or commitment fades, it is much easier to terminate their relationship with the company. I admire the way that Mike has been so successful in applying this to his businesses (e.g., iCopyright), and yet I have reservations about the commitment issue, which I see as a two-way street. It was good to have the opportunity to consider alternative perspectives, and Mike certainly provided food for thought (and, fittingly, right before lunch).

After lunch, Sunny Kobe Cook, founder of Sleep Country, USA, (another company with a well-known jingle that I also have never heard) gave a keynote in which she emphasized the importance of recognizing that every employee is a paid spokesperson for your company. She referred to a recent Gallup poll that revealed a majority of employees being "disengaged" as a result of not receiving sufficient recognition, opportunities to make significant contributions, and/or not having a sense of belonging in their workplaces. A story about an assistant driver for Sleep Country, USA, who described himself as "Sunny's Goodwill Ambassador" provided an example of how she had created a culture of engagement in the company she founded.

Michael Pickett, CEO of Onvia.com, and John Holt, President and CEO of Cobalt Group, gave a joint, closing keynote presentation, on their experiences in endurance, steering their companies through hard times, and rising to meet the challenges. Interestingly, though hardly surprisingly, when each was asked whether, given all they've been through, they both responded affirmatively (and enthusiastically). John said that entrepreneurship has taught him more about himself than anything he has ever done. This enhanced (and sometimes painful) self-knowledge is one of the benefits I derive from parenthood ... and, I suppose, shows yet another dimension in which growing a company, and guiding it through challenging times, is closely aligned to nurturing the development of a child. Fortunately, the mortality rate for children is nowhere near as high as for new companies.